Correlation Between POWR Lithium and Lake Resources
Can any of the company-specific risk be diversified away by investing in both POWR Lithium and Lake Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining POWR Lithium and Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POWR Lithium Corp and Lake Resources NL, you can compare the effects of market volatilities on POWR Lithium and Lake Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in POWR Lithium with a short position of Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of POWR Lithium and Lake Resources.
Diversification Opportunities for POWR Lithium and Lake Resources
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POWR and Lake is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding POWR Lithium Corp and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL and POWR Lithium is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on POWR Lithium Corp are associated (or correlated) with Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of POWR Lithium i.e., POWR Lithium and Lake Resources go up and down completely randomly.
Pair Corralation between POWR Lithium and Lake Resources
Assuming the 90 days horizon POWR Lithium Corp is expected to generate 1.49 times more return on investment than Lake Resources. However, POWR Lithium is 1.49 times more volatile than Lake Resources NL. It trades about 0.14 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.03 per unit of risk. If you would invest 2.21 in POWR Lithium Corp on September 5, 2024 and sell it today you would earn a total of 1.61 from holding POWR Lithium Corp or generate 72.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
POWR Lithium Corp vs. Lake Resources NL
Performance |
| Timeline |
| POWR Lithium Corp |
| Lake Resources NL |
POWR Lithium and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POWR Lithium and Lake Resources
The main advantage of trading using opposite POWR Lithium and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POWR Lithium position performs unexpectedly, Lake Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lake Resources will offset losses from the drop in Lake Resources' long position.| POWR Lithium vs. Apple Inc | POWR Lithium vs. Microsoft | POWR Lithium vs. Amazon Inc | POWR Lithium vs. Alphabet Inc Class C |
| Lake Resources vs. NETGEAR | Lake Resources vs. Paysafe | Lake Resources vs. Minerals Technologies | Lake Resources vs. Plexus Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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